Legal puzzle: Amazon and former employee set for trial in unusual patent dispute

The clear acrylic trophy is shaped like a puzzle piece, with the Amazon logo and the inscription, “In recognition of your innovative thinking and contribution to our technology. Congratulations on being an Amazon inventor!” It bears the signature of “Jeff” — a.k.a. Amazon’s Jeff Bezos — and is given to employees to commemorate a patent filing.

People “get very competitive with these,” said Scott Sanford, an Amazon patent attorney, in a deposition. “They build walls out of them in their office, proudly display them in their office. People get pretty excited about getting them.”

But does a puzzle piece qualify as adequate consideration for handing over an invention to the company? That’s one of the actual legal questions being debated in an unusual patent dispute between Amazon and a former employee.

The case, first reported by GeekWire in December, is set for trial in King County Superior Court in Seattle next week, on July 15. The ongoing filings in the case are a window into the world of corporate patents — including the tendency of companies to focus on patent applications even in the absence of actual product plans.

“It is undisputed that no one at Amazon has taken his invention and done anything with it,” writes a lawyer for the former Amazon employee, Kivin Varghese, in one filing.

Varghese, the former CEO of online ad startup BrandPort, contends that the puzzle piece and a special icon next to his name in Amazon’s employee directory were essentially all he received when the company decided to seek a patent on his idea for a new type of video advertising technology. Varghese says he came up with the idea before joining Amazon, and he now wants to pursue it on his own with another company.

He is asking the court to give him ownership of the invention and the patent application. His lawyers contend that he didn’t receive actual consideration from Amazon, making his assignment of the patent to the company legally invalid.

They have submitted photos of his puzzle piece as an exhibit in the case, saying it doesn’t count as consideration because Varghese didn’t specifically bargain for it.

Amazon’s lawyers disagree, saying there was a legal exchange of consideration. For one thing, the company spends more than $25 on each puzzle piece, they say in one court filing. They also cite as consideration the patent application filing fee ($1,370, paid by Amazon), the use of Amazon’s legal resources to file the patent, and the salary and benefits received by Varghese during his time as an employee.

In addition, Amazon’s lawyers point to the terms of Varghese’s employment agreement — including an invention assignment agreement — plus additions made to his invention to tailor the idea to Amazon’s business.

“Varghese’s belief in his entitlement to the invention is based upon the misconception that, because he purportedly “conceived” of some ideas prior to starting at Amazon, they are his. Varghese makes this argument despite the fact that he adapted those ideas for use by Amazon and participated in the evaluation and development of the ideas through the filing of a patent application incorporating those ideas by Amazon’s hired outside counsel. Once the idea was specifically adapted by Varghese for use by Amazon, and actively marketed within the company in the hopes that it would advance his career, the idea transformed into the type of idea that he agreed he needed to assign, and did assign, when he entered into the Invention Assignment Agreement as a condition of his employment.”

According to court records, Varghese had hoped to build a new business inside Amazon based on his idea, and receive additional compensation as a leader of the project. However, he was separately terminated after helping to identify and resolve a problem with the Kindle Fire ad platform prior to its launch, he said in his complaint. Varghese alleged that he was let go in retaliation for going over his manager’s head to raising the issue internally.

The patent application isn’t yet public, but one of the court filings describes Varghese’s invention as “a web and mobile video advertising application that works to improve ad engagement and product purchase conversion rates from broadcast TV, cable and online video advertising.”

Theresa Pruett, a lawyer for Varghese, writes in a filing, “It appears that Amazon believes that regardless of when Varghese’s invention was conceived, Amazon’s illusory promise of continued employment, a plastic toy-like gift and an intangible and ephemeral phone icon give it the ownership rights to Varghese’s invention.”

The case also has focused on the legality of a non-compete clause in Varghese’s employment agreement. For more on the case, see the motions for summary judgment by Varghese (PDF) and Amazon (PDF), both of which were turned down by King County Superior Court Judge John Erlick.

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Comments

Guest

This is the stuff that gets hairy. One one side you have the person who came up with the concept, was acknowledged by the company for doing so, but since they signed an agreement when taking a position within the company, they basically forfeited all legal rights to profit from their ability to innovate. On the other side you have a company who knows this and is profiting from thousands of people who have signed similar agreements when taking on employment.

After a while, this will stifle innovation at the company and after people are burned a few times, they leave and start their own companies to profit from their innovations again. There’s another local company you can see on the other side of the pond that has done this too. History repeats itself. Easy to see the outcome if you look at a chart of their stock.

Amazon Worker

If Varghese had his idea independently and prior to working at Amazon and didn’t file for a patent by himself, I think it’s pretty clear he saw some value in having the company do it for him.

I’ve participated in a few of these applications at Amazon and it is no small amount of work that the legal guys (both inside and outside) do to take your “idea” and fully document and submit it on your behalf. Sure, it’d be cool to get something besides a puzzle piece and a phone tool award, but those forms of compensation are well known within the company.

James S

Not surprised – Amazon is good at getting great ideas out of their employees and making their senior execs rich from them. Pretty amazing they’re claiming ownership of an idea Vargese had before joining the company.

Guest

seems silly to me. What did he expect when he gave AMZN the idea and participated in the patent filing. Either he should have just kept the idea to himself or negotiated with AMZN before telling them the idea (unlikely they would agree). You can’t ‘cherrypick’ which route you want after the fact.

Jonathan

This is very troubling. I am a fan of Amazon. But stuff like this will tarnish the company’s image, and longterm, it’s ability to recruit top talent amidst a highly evolving and highly competitive industry. Might not seem like a big deal right now, but I’m sure there are other employees or former employees who are in the same position as Mr. Varghese. According to this article, Varghese was let go for “helping to identify and resolve a problem” with one of its products. And then this lawsuit. Something is not adding up. This could be a win-win if Amazon allowed it. But appears that this is a big company trampling on an up & coming star.

http://www.christopherbudd.com Christopher Budd

Other posters have made good points about how this system can work against Amazon in the long term.

But I have to say I have zero sympathy for the person behind the suit. At Microsoft like Amazon they make very clear that your patent work belongs to the company. If you want to come up with a patent and keep it, then you need to do it not as an FTE of the company.

This feels more like buyer’s regret (or seller’s regret more accurately) than a real legal issue. If there was some deception in the agreement that would be one thing. But near as I can tell Amazon accurately represented the deal, the person took it, and now they’re sorry and want a do over.

Amzn Dev

I’ve been a dev manager at Amazon for a few years. Things like this don’t sit well with some current employees. I can say if not for the stock options I’d be outa here… and several of my colleagues would be too… not a great environment. If the stock takes a hit there will be an exodus – lots of latent dislike for how employees are treated here – worked really hard and often treated like cattle. Am not surprised the company is treating this former employee like this. Looks like he just wants to take his ideas that he had before even coming to the company and build them somewhere else and the company is tying him up in court over this.